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Reality Check: As Activists Push for a Higher Minimum Wage, McDonald’s Automates
The economic impact of the minimum wage is one of the most studied public-policy topics I’ve run across. But sometimes these analyses have an air of unreality about them. At an AEI event earlier this year, Heidi Shierholz — then an EPI think tanker, now the US Labor Department’s chief economist – argued in favor of President Obama’s plan to raise the minimum wage. Shierholz also said she was “not so worried” about the possibility that dramatically raising the minimum wage might worsen the competitive position of low-skill humans versus machines. “It’s an unknown,” she added, what will happen in the future.
Well, perhaps the future is here. Here is an interesting tidbit from McDonald’s earning conference call yesterday (via The Wall Street Journal):
By the third quarter of next year, McDonald’s also plans to fully roll out new technology in some markets to make it easier for customers to order and pay digitally and to give people the ability to customize their orders, part of what the company terms the “McDonald’s Experience of the Future” initiative.
As a WSJ editorial put it, ” … consumers better get used to the idea of ordering their Big Macs on a touchscreen.” Now McDonald’s has been frequently attacked by minimum wage proponents. Although CEO Don Thompson has suggested the company would support Obama’s call for a $10.10 wage, that’s not good enough for advocates who want the minimum set at $15 an hour.
But there is a better way to help low-skill workers, at least over the near term: expand the Earned Income Tax Credit or tack on some other sort of new wage subsidy. As AEI economist Michael Strain has put it:
Published in GeneralLiberals, in supporting minimum-wage increases, implicitly argue that the employers of low-skill workers, together with consumers of the products and services the workers help provide, should bear the burden of ensuring that low-skill workers don’t live in poverty. Conservatives should reject this argument, insisting that all of society is responsible for helping the working poor — to escape poverty, to earn their own success, to flourish.
I find this far more destructive than a hike in the minimum wage. It is a blatant redistribution scheme with no *up side* for taxpayers.
As an employer, I’d rather hire fewer employees, pay them more and expect them to take on more responsibilities. Oh wait … I already do that. It works.
I once worked with poor single mothers who were concerned about losing their EITC benefits. Earning more money would mean that they’d lose the tax credit, which is effectively a serious regressive tax on work. How do we encourage them not just to work, but to advance?
Subsidies! Credits! The answer is NOT in what the government can give us or allow us to keep! The answer is to get the hell out of the way. Period. End of sentence.
The crux of the problem is bolded here.
Contrary to popular belief, most divorced fathers support their children (emotionally and financially); the real culprits are the feckless, unmarried baby mamas and daddies who know they can always “go on the check” or receive tax refunds they never earned in the first place.
So the true question should be: How do we stop the reward system for irresponsible behavior and this ridiculous belief that bearing children under any circumstances is a *right.*
Here’s what Walter E Williams said.
“EITC” illustrates a serious problem in our schools. Spelling. The correct way to spell welfare is w-e-l-f-a-r-e.
I’m glad to see the Ricochetti are aware of the pernicious impact of EITC type programs as opposed to a straight up increase in the minimum wage. The main impact of EITC is to further encourage more illegitimacy and irresponsibility in the underclass. While a fool believes what he sees the wise man has the power to reason away – I understand our economists and professional deep thinkers at our think tanks believe an $8 wage and $7 of govt benefits is the same as a wage that allows a man or woman to live in the mainstream of society, but people in the real world know its not true.
If automation is coming to low skilled jobs [I think its coming whether the minimum wage is increased or not] the correct government response should be to abolish the payroll tax and substitute a VAT or carbon tax to replace it. And automation can’t come fast enough for me if it replaces illegal immigration in the fruit picking type industries.
Petty,
Many fruits, and vegetables, really do need to be harvested by hand, alas.
I’m looking forward to the robots taking over at the fast-food restaurants. Maybe the food will actually start looking like the pictures in the ads, instead of a burger hanging out one side of the bun, the ketchup spilling out the other side, and a big greasy thumbprint on top.
I’ll order from a touchscreen.
The touchscreen doesn’t sound disinterested, doesn’t have an appearance that either scares me or grosses me out, doesn’t mess the order up, and doesn’t (hopefully) say “Have a nice day”.
The activists may well get what they’re asking for, soon the two or three people working a fast food restaurant may need the tech skills to be worth $15 an hour.
Mark Krikorian has occasionally written on robotics technology – I believe mostly in Japan, but also here – that can handle the tactile and visual demands of fruit and vegetable picking.
even strawberries, etc? Wow!
Ahh, but the strawberries that’s… that’s where I had them. They laughed at me and made jokes but I proved beyond the shadow of a doubt and with… geometric logic… that a duplicate key to the wardroom icebox DID exist, and I’d have produced that key if they hadn’t of pulled the Caine out of action. I, I, I know now they were only trying to protect some fellow officers…
The EITC is good policy. It rewards work, not sloth. Most important, it helps the young unskilled man (who was, let’s say, unlucky enough to have been raised and “educated” in the dystopian craphole that is East Cleveland) to support himself as he enters the workforce and gains skills and dignity and income — and overcomes disadvantages most of us will never know. And it does not discourage advancement since it is structured such that an increase in pay never results in a more sizable reduction in the credit.
The EITC is conservative, compassionate, and as both Milton Friedman and Ronald Reagan agreed, a truly effective anti-poverty program.
A minimum wage increase, on the other hand, is terrible policy, since it makes it tougher for that same unskilled man to begin his path to dignified self-sufficiency. Plus my upper middle class teen daughter doesn’t need a raise.
Nonsense. I have twin teen brothers working in one of my stores who have applied to USC and Stanford and their wealthy investment banker parents have no intention whatsoever of shelling out $100k annually without contributions from them. These kids are under enormous pressure to help foot those bills because the family refuses to take out fed loans and I have to say my admiration knows no bounds. They are paid twice the minimum wage but are expected to do twice the work. They do and they received stellar recommendations from my husband that were included in their college applications.
The EITC is basically good policy. Yes, it’s welfare, but it’s welfare for poor people who work. The more poor people who work the better, for themselves and for everyone else.
Expanding it is a much better idea than a massive increase in the minimum wage. That will price folks out of the labor market, act as a windfall for union members and coffers, and pointlessly drive up prices. Of course, we don’t necessarily have to choose between those two options, but if we did I know which one I’d pick.
I don’t see this happening anytime soon. Do you?
We’ve got welfare for old people (Medicare, SS), welfare for deadbeats (EBT, Medicaid), welfare for clever incompetents with silly ideas (grants), welfare for suck-up hoop-jumpers (licensing, guilds), welfare for farmers (subsidies, poor border enforcement), welfare for big corporations (industry-specific tax credits, bailouts, enterprise zones), welfare for mildly talented louts whose daddies did stuff (legacy admissions, politics) etc.
Just for the record, there is no such thing as “welfare for old people (Medicare, SS).”
People pay FICA taxes their entire working life. They just want their money back.
Perhaps I should’ve said “doesn’t deserve”, not “doesn’t need”. My daughter picks up dog doodoo at an animal clinic/dog border. The idea that the middle class business owner should be mandated to give her a raise to $10.10/hr is absurd.
You’ve got me there! My guys handle customers, visual displays, merchandising and some of the financial reports.
Yeah, there is. It’s called the “employer match.”
I pay that garbage every two weeks. Supposedly for my 20-something employees who won’t collect squat.
In reality, I’m paying it to Boomers who didn’t contribute much relative to what they will collect.
Palaeologus: Let’s keep some perspective. These discussions are all very interesting but trivial compared to what’s coming Nov. 8 at 8:00pm in East Lansing.
You’re wrong.
I’m a Boomer, have matched for 20 years and have paid into the system my entire working life. I’ve been prepared for years by my accountant to expect nothing back however because for $400/hr he at least had the knowledge to inform me the money was long gone. You’ll excuse me if I appear somewhat hostile.
….which is not to say she couldn’t handle financial reports in addition to poop. Maybe I need to have a talk with her. :)
So sad, but so true. In the old days, November 29 would have been the date.
Actually, right behind that will be a smart phone app that lets you order and pay before you walk in the door so your order is waiting…
I have worked as an automation engineer for 30 years. There is little at McDs that couldn’t be automated with today’s technologies. Someone to unload the truck and fill the hoppers with buns, sauces, fish fillets, hamburger patties, fries, etc. and a good technician, and someone to keep things clean would be all that is required.
(Hmm… haven’t tried commenting in a week. Quoted post shows up with a name and four lines of nothing. Is this just the preview or is this broken now?)
This is really the crux of the matter. Labor is a commodity that’s regulated by the laws of supply and demand. You ask someone to pay more for labor and the quantity demanded goes down. If you ask someone to pay three dollars extra per worker per hour, then they’ll hire less people. It isn’t a problem of “Can we do it” it’s a problem of “How much does it cost to do it”, and the more that balance shifts the more people lose their jobs.